Monday, March 20, 2017

Leading Indicators Signal Strong Growth Ahead, If...

Popular Economics Weekly

The Republican Congress needs to abandon its obsession with repealing Obamacare, since Republicans will never agree on a replacement, and many Senate Republicans have just announced they oppose the current Republican House Trumpcare proposal.

Instead they need to focus on passing an infrastructure bill that will rebuild public and private infrastructure that the American Society of Civil Engineers (ASCE) says is now behind more the $4.5 trillion in maintenance alone, such as highways, harbors, wastewater facilities and bridges.

Graph: CBO

The Conference Board’s Index of Leading Economic Indicators is one of several anecdotal surveys (i.e., opinions) that aren’t yet borne out by actual activity. The Conference Board said its leading economic index rose 0.6 percent in February — the third straight gain of that magnitude — to reach its highest level in more than a decade.

“Widespread gains across a majority of the leading indicators point to an improving economic outlook for 2017, although GDP growth is likely to remain moderate,” said Ataman Ozyildirim, director of business cycles and growth research at The Conference Board.

The improvement in the LEI over the past several months is said to be due to optimism that Congress can pass a massive infrastructure bill, as well as reducing regulations. But can Trump keep his promise to invest in infrastructure, when his new proposed budget cuts road spending by nearly half a billion dollars, and includes no new infrastructure spending?

The American Society of Civil Engineers (ASCE) estimates the US needs to spend some $4.5 trillion by 2025 to improve the state of the country's roads, bridges, dams, airports, schools, and more in its 2017 Infrastructure Report Card.

For instance, out of the 614,387 bridges in the US, more than 200,000 are more than 50 years old. The report estimates it would cost some $123 billion just to fix the bridges in the US, and many of the one million drinking water pipes have been in use for almost 100 years. The aging system makes water breaks more prevalent, which means there are about two trillion gallons of treated water lost each year.

And even more important to our security and economic well-being, the majority of the transmission and distribution lines were built in the mid-20th century and have a life expectancy of about 50 years, meaning that they are already outdated. So between 2016 to 2025, there's an investment gap of about $177 billion for infrastructure that supports electricity, like power plants and power lines, reports the ASCE. 

Need we say more about the importance of a major infrastructure bill, which is far more important to Americans that the ideological debate over Obamacare and healthcare in general?

Harlan Green © 2017

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